Top 25 Tests for Every Organisation: Test 11, Payroll Phantom Employees

2013-08-01

By Phil Lim
The hired hands of super villains often walk among us. They hide in plain sight, impossible to distinguish from the innocent bystander. Such is the case with phantom employees. A payroll transaction file contains thousands of legitimate employees, and it’s nearly impossible to distinguish them at a glance from the employees that are fictitious.

There are many motivations for the creation of these phantom employees, from hiding facilitation payments to foreign officials, to outright fraud. Whatever the case, you’ll need a set of analytic superpowers to cut through the risk. Today, we’ll only focus on one particular test, but we’ll also outline other potential tests for your consideration.

Risk: Phantom employees on the payroll may be used to channel funds to an unauthorized party, or as a vehicle for fraud.

Test: Identify duplicate employee records where there is more than one employee associated with the same bank account or address.

Data Acquisition: Please refer to the previous Top 25 test for acquiring payroll and timekeeping data. Our focus today will be on the HR system, and specifically around employee bank accounts and addresses. Make sure you have at least the employee name, employee number, and employee address or bank account number.

Test Steps:

1. Obtain a dump of all the HR employee files for the investigation period.    – See above section on Data Acquisition.
2. Import the data into ACL Analytics using the import wizard.
3. Ensure completeness by verifying the data against control totals (e.g. Count number of employees to tie to investigation period actuals).
4. First, let’s test addresses. Remove duplicate records, there may be more than one record for each employee if they transferred, or changed address:    – SUMMARIZE ON EMPLOYEE_NUMBER EMPLOYEE_NAME EMPLOYEE_ADDRESS OTHER ALL TO T_Emp_Addr_Sum PRESORT
5. Now, identify and report any employees with duplicate addresses    – DUPLICATES ON EMPLOYEE_ADDRESS OTHER ALL TO Emp_Dup_Address PRESORT
6. Repeat steps 4 and 5 for bank account number

Conclusion: You’ll want to be aware that spouses who are both employees will likely show up in this test, and that’s good! That way you know your analysis is working. As mentioned in the prologue, this is just one of a set of analytic superpowers you can use to identify phantom employees. Others might include analyzing employee addresses for PO Boxes, or identifying employees without any payroll deductions, or invalid/duplicate tax identification numbers (SSN or SIN).

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